Finance Bill 2026 Breakdown: Key Changes Proposed by the Government
The proposed finance bill 2026 is shaping up to be the government’s most ambitious tax grab yet, with a whole heap of changes that will hit landlords, mobile phone users, businesses, and digital financial service providers where it hurts.
While the Bill wont be law just yet and still has to go through a bunch of public consultations and parliamentary wrangling before it can even be considered, its already giving us a sneak peek into what the government plans to do to boost revenue collection and expand the tax base.
The proposals come at a time when the government is desperate to squeeze out approximately KSh3.5 trillion to fund its budget and keep on top of its public spending priorities.
Rental Income Tax Set for Increase
Landlords better get used to putting their hands deep in their pockets if these proposed changes get the nod.
The residential rental income tax rate would jump from 7.5% to 10% under the finance bill 2026. The government is trying to spin it as a way to rake in more money from the rapidly growing rental sector.
So property owners who earn money from renting out their places would find themselves coughing up a bigger chunk of their earnings to the taxman.
Mitumba Tax Proposal Dropped
The proposal to slap a presumptive tax on imported second-hand clothing – aka mitumba – had everyone watching with bated breath.
The tax was initially lined up to be between 1.5% and 5% of the import value of the goods, but after some deliberations the National Assembly Finance Committee ripped it out of the latest draft of the Bill.
For now the controversial mitumba tax is as good as dead and wont be making it through Parliament.
Digital and Financial Services Face New VAT Measures
The bill also wants to take a bigger slice of the digital economy’s pie by applying Value Added Tax (VAT) to the commissions and fees earned by digital financial service providers.
Banks, fintech companies, payment processors, and card networks will be in the firing line if the proposed measure gets the go-ahead.
The government reckons this will help them cash in on the rapidly expanding world of digital financial transactions and services.
New Rules on Retained Company Profits
Another major proposal is about to clamp down on corporate earnings that remain undistributed – and stick around.
The Kenya Revenue Authority (KRA) will get the power to treat at least 60 percent of profits that are just sitting idle as having been paid out to shareholders as dividends – for tax purposes.
The idea is to stop companies playing games by holding onto profits for as long as they can just to avoid paying dividend-related tax.
What it basically means is , businesses could soon start facing tax obligations on profits that have never actually left the company – which is a pretty big deal.
Mobile Phones Could Become More Expensive
Mobile phone users are going to feel the pinch of these new tax proposals.
The Bill wants to bring back a 25 percent excise tax on mobile phones – which is a pretty big U-turn on previous efforts to lower taxes on these kinds of devices & promote digital inclusion.
Now, the tax won’t be charged when the phone arrives – but when it’s first connected to a Kenyan mobile network.
Industry insiders are warning that this could make owning a mobile device a lot more expensive for many people.
Other Significant Changes in the Bill
There’s more to this Finance Bill 2026 than just the big headlines.
For example, tax returns will need to be filed a lot quicker – with a deadline of just four months after the end of the financial year – down from six.
The Bill also wants to change the tax rules for non-resident landlords who own properties in Kenya and earn rental income from them.
But at the same time – if Parliament gives the go-ahead – some big VAT exemptions – including ones linked to affordable housing – could disappear.
Tax Amnesty and Expanded KRA Powers
The government also wants to launch a tax amnesty program to cover any tax debts that have been lying around since 2025.
Taxpayers who qualify will have until the end of 2026 to take advantage of the amnesty deal.
As part of this – KRA will get some new powers & tools to help them make sure people are paying their taxes correctly – including pre-filled tax returns.
What Happens Next?
Despite all the attention these proposals have got – nothing’s actually been made into law yet.
The Finance Bill 2026 is still out for public comment & going through the parliamentary wringer – which means that lawmakers can still change, ditch or add bits of the Bill before it’s all finally approved.
So , the coming few months will be pretty crucial for businesses, investors, landlords and anyone who’s just trying to make a living in this economy – as it will be decided which of these proposals & ideas actually make it through.
In Other News : “We Are Not Going to Consult Citizens” – Duale Sparks Storm Over Ebola Facility
Finance Bill 2026 Breakdown: Key Changes Proposed by the Government
